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New Rules for the Grocery Sector from 30 April 2016

On 30 April 2016, the Consumer Protection Act 2007 (Grocery Goods Undertakings) Regulations 2016 (the “Regulations”) take effect. Designed to ensure fair and balanced dealings in the grocery goods supply chain, they apply to contracts for the sale or supply of certain prescribed classes of food and drink between suppliers and relevant retailers or wholesalers that are entered into or renewed on or after 30 April 2016.

On 18 March 2016, the Department of Jobs, Enterprise and Innovation published Guidelines which provide further information and guidance on the Regulations (the “Guidelines”).

WHAT IS COVERED?

The Regulations apply to the following prescribed classes of grocery goods:

food and drink for human consumption;

additives, ingredients and processing aids in the preparation of food and drink for human consumption; and

intoxicating liquors.

The Regulations do not apply to food or drink served in the course of providing hospitality services. They also do not apply to other classes of grocery goods such as toiletries, household cleaning products or garden plants and bulbs.

WHO IS COVERED?

The Regulations regulate the contractual relationship between suppliers and ‘relevant grocery goods undertakings’. A relevant grocery goods undertaking is “a grocery goods undertaking engaged in the retail or wholesale of grocery goods in the State that has, or is a member of a group of related undertakings that has, an annual worldwide turnover of more than €50 million”. Although not stated in the Regulations, the Guidelines state that the €50 million turnover threshold applies only to sales of the prescribed classes of food and drink products.

Therefore, the Regulations apply to relevant retailers/wholesalers operating in the State which have an annual worldwide turnover of more than €50 million attributable to sales of the prescribed classes of food and drink.

CONTRACTUAL REQUIREMENTS

The Regulations impose the following requirements on contracts between suppliers and relevant retailers/ wholesalers:

contracts must be in clear understandable language and in writing;

contracts must be signed and retained by the supplier and the relevant retailer/wholesaler;

relevant retailers/wholesalers are prohibited from varying, terminating or renewing a contract with suppliers unless the contract expressly provides for such variation, termination or renewal and specifies the notice period (which must be reasonable);

relevant retailers/wholesalers must pay suppliers within 30 days of the date of receipt of the invoice or delivery, whichever is later, unless the contract makes express provision for a different time-frame in respect of payments;

relevant retailers/wholesalers may only require suppliers to purchase goods or services from third parties in limited circumstances;

parties shall not be liable for nonperformance due to circumstances beyond their reasonable control; and

suppliers have the right to request forecasts from relevant retailers/ wholesalers toGether with an explanation of the basis on which such forecasts are prepared.

WHAT PAYMENTS ARE ALLOWED?

The Regulations restrict the circumstances in which relevant retailers/wholesalers can seek payments from suppliers for:

stocking, displaying and listing goods;

promotions;

marketing costs;

retention, increased allocation or better positioning of shelf space;

wastage; and

shrinkage.

By contrast, the Regulations prohibit relevant retailers/wholesalers from compelling suppliers to make a payment for advertising or display of the suppliers’ goods in the premises of the relevant retailers/wholesalers.

COMPLIANCE WITH THE REGULATIONS

Relevant retailers/wholesalers are obliged to demonstrate their compliance with the Regulations in an annual compliance report to the Competition and Consumer Protection Commission (the “CCPC”) and to maintain records of their dealings with suppliers for inspection by the CCPC. Relevant retailers/wholesalers will also be required to appoint and train members of staff to be responsible for compliance with the Regulations and to inform other members of staff about the implementation of the Regulations within the business. They must appoint a “liaison officer” to deal directly with the CCPC.

ENFORCEMENT OF THE REGULATIONS

Under the Regulations, the CCPC has the power to: » monitor whether relevant retailers/ wholesalers are complying with the Regulations;

investigate complaints into potential breaches of the Regulations;

issue contravention notices directing relevant retailers/wholesalers to comply with the Regulations; and

initiate enforcement proceedings against relevant retailers/wholesalers which fail to comply with contravention notices or which breach the Regulations.

Breach of the Regulations (including failure to comply with a contravention notice) may result in prosecution with potential penalties ranging from:

on a first summary conviction, a fine of up to €3,000 or imprisonment for up to six months or both; to

on a subsequent conviction on indictment for the same offence, a fine of up to €100,000 or imprisonment for up to 24 months or both.

In addition, anyone who is aggrieved by a failure to comply with the Regulations has a right of action to seek damages (including exemplary damages) and other relief before the Circuit Court.

FURTHER INFORMATION

For further information and guidance on what the Regulations mean for your business please contact a member of the Competition and Regulated Markets Group of Arthur Cox.

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